Oversold

Here we go again testing another 52-week low in the S&P 500. I hope by now we have all learned to tune out the terms "this is THE bottom", "this is a bottoming process," and, my favorite, "buy now because in 10-20 years you will wish you had done so." The one piece of punditry that intrigued me starting into 2009 was that it seemed even bears expected a big rally to start the year that would then produce a huge opportunity to re-open shorts between March and May. Instead, the big rally of 2009 was squashed right after the first week.

Now that we have essentially retested the 2008 lows, it is a tough determining whether we break them here or bounce a few more times before the lows break decisively. Time will certainly tell. But we are oversold enough for it to make sense to begin positioning for some kind of near-term (sharp?) bounce by reducing shorts and increasing long exposure.

Be careful out there!